Houthis Expand Shipping Chaos and Saudis Turn Nuclear

Oil markets do not just run on supply and demand, they run on geography. When a single chokepoint turns into a pressure valve, investors feel it fast through crude prices, inflation prints, and sudden risk-off moves. We sit down with Clem Miller to unpack why Iran’s leverage around the Strait of Hormuz keeps expanding, and how the Houthis in Yemen can extend that leverage into the Red Sea and the Bab el-Mandeb Strait. 

We walk through who the Houthis are, how they built real military capability, and why shipping threats are more than theater. When tankers and container ships detour around the Cape of Good Hope, the world pays in time, fuel, and higher insurance, and that cost can show up everywhere from energy stocks to consumer prices. We also talk about what it means when militant groups become de facto governments, using Yemen and Hezbollah’s role in Lebanon to frame what “investable” really means when security and politics do not align. 

Then we pivot to a bigger question with huge market implications: Saudi Arabia’s nuclear ambitions and the fading credibility of anti-nuclear proliferation. We cover why enrichment matters, why incentives change once countries are attacked or threatened, and where nuclear energy could become an investment theme despite financing, regulation, safety, and NIMBY constraints. We close with the risk that could dwarf everything: the Taiwan Strait, semiconductors, and how a blockade could shock a tech-heavy economy without a single shot fired. 

Subscribe, share this with a friend who follows markets, and leave a review so more people can find the show. Which chokepoint do you think the market is pricing wrong right now?

Straight Talk for All - Nonsense for None

Please check out our other podcasts:

https://skepticsguidetoinvesting.buzzsprout.com

Disclaimer - These podcasts are not intended as investment advice. Individuals please consult your own investment, tax and legal advisors. They provide these insights for educational purposes only.

Transcript

Welcome And Strait Risks

Steve Davenport 0:26

Hello everyone and welcome to another episode of Skeptic's Guide to Investing. I'm here today with Clem Miller, and we are just a little bit um surprised that the Iran still tries to do more and more to take their newest toy, which is blockading and um disrupting the flow of ships through different waterways, and now they've requested that their support group or the group they've promoted, the Houthis in Yemen are going to start to um block another strait. So, Clem, do we have a number of all the straits in the world so that we can start to say everything has been blockaded, or are we getting close to the number of straits that really matter? I mean, I I keep thinking about that strait of Taiwan, but um tell me, what what are and who are the Houthis and how do they impact energy in the world as much as Iran is influencing energy in the world through the Strait of Hormos?

Clem Miller 1:39

So the Houthis are a political military group in the country of Yemen that is largely of Shiite religious origin, as the Iranians are largely of of Shiite um religious origin, Shiite Islam.

Who The Houthis Are

Clem Miller 2:04

Are they a mil political group or are they a religious group? Oh, they're a political military group.

Steve Davenport 2:11

Okay.

Clem Miller 2:12

Okay. But but they are comprised mainly of Shiite population. So think about it this way: Hezbollah in Lebanon, that's a military political group, but most of their members, or you know, vast majority of their members are actually Shiite Muslims, right? So the same think of that as the same. So Hezbollah to Shiite Lebanese is the same thing as Houthis to Yemeni Shiites. Okay, so that's that would be the analogy. And so so the Yemen had as happened, well, Yemen is a very big country population-wise. It looks kind of small on a map because it's kind of wedged in there next to Saudi Arabia, which is much bigger. Uh, but when you consider that a good chunk of Saudi Arabia is desert, , and Yemen has these big mountains and whatnot, Yemen actually has quite a quite a large population. And actually is, if you look at long-run Arab history, it's actually kind of the birthplace of the Muslim, or of not of not of the Muslim world, that was Mecca and Medina, but of like the Arab language, Arab culture, and so on all originated from you know from Yemen. And so Yemen holds a important place historically. You've got the Shiites who are they're not the you know, the there's there's a large Sunni Muslim population in Yemen as well, but the majority are Shiite. And all the the religious affiliations, Shiite and Sunni, are basically superimposed on a much older tribal tradition. So tribes are very big in Yemen as well, um, as they are throughout the Arab world, but you know, in certain traditional areas, tribes are much more important, and that's that's certainly the case in Yemen. So the Houthis emerged from this environment to basically run the Shiite areas. There are some areas that are not under the control of the Houthis. So it's not like the Houthis control all of Yemen, but they control very significant parts of Yemen, and they're um you know they're armed by the Iranians, , their Shiite brethren, and and the Houthis you know have used this military power, these missiles and so and drones and whatnot that Iran has provided as a threat to shipping in the Red Sea. And you might remember that a few years ago, um late 2023, 2024, 2025, the Houthis were attacking Western shipping because of the Gaza War. And so initially they were going to go after just Israeli shipping coming out of

Red Sea Disruption And Oil Spikes

Clem Miller 5:19

a lot in the Gulf of Aqaba. Uh but then they started attacking you know western shipping, you know, companies like Maersk and and so on. So they went after those, they went after western ships too, forcing those ships to have to travel, if they were going to do east-west trade, , to travel all the way around the the Cape of Good Hope, um Southern Africa. So because they basically blocked off the Red Sea. And and so there was a um hiatus once the Gaza war sort of simmered down for a while, and the Houthis sort of you know didn't attack anymore. And even during these first few months of the conflict with Iran between the US, Israel, and Iran and the Strait of Hormuz situation, the Houthis didn't attack either. You know, presumably the Iranians told them to hold off. So now the Saudis have been upping their production because they can't get their oil ships out of the Strait of Hormuz. Uh the Saudis have been trying this, trying to use this pipeline that they have to the Red Sea coast. There's a pipeline that extends from the oil fields, , which are you know on the Gulf side, , which is on the east, and they put them on, they put the the oil instead in this pipeline that goes to the west coast on the Red Sea. And so now the Iranians told the Houthis, apparently, um, go after the Saudi shipping in the Red Sea, which comes from from that pipeline port, right? So that's it. I mean, so they so they're blocking that shipping, and that's sending oil prices sky high again.

Steve Davenport 7:12

Do you think the Houthis, I mean, when I look at these groups who are associated with, you know, the people in Gaza, the people in the Hezbollah, the the Houthis, like which of these groups do you think has more of a chance to really become, you know, is it are any of these groups going to be able to

Can Militias Become Governments

Steve Davenport 7:36

take over or rule in their respective country, or are they all just splinter groups or too small to ever really get a consensus and run in one of these countries? Is it possible we ever see a Houthi run Yemen or a Hezbollah run in in country in the Middle East?

Clem Miller 7:59

Well, I I think I think the Houthis are effectively running most of Yemen right now. So I think they're you can call them a government. Um they're not the official UN recognized government, but you know, they control enough of the country that you can basically call them a government. Um so I think that's already true for the Houthis. In in Lebanon, you know, the Hezbollah controls a good chunk of Lebanon, although Israel is has done a number on them in the south, but they control a good chunk of South Lebanon, and they also have a political party which is represented in the Lebanese parliament. Um the thing about Lebanon is it's a very complicated country with multiple religious groups, and and there's a the constitution that sets up, you know, the the president has to be of one religious group and the prime minister another, and the cabinet has to have so many of this and so many of that. And and Hezbollah is part of that. Hezbollah is both you know part of the political system and its own independent military.

Steve Davenport 9:20

So it's I don't, you know, Hezbollah how does a country live with a group inside of it that has its own military doing its own thing? I mean, doesn't that create I mean, doesn't the military of the country of Lebanon, you know, do they just look sideways at the guy carrying the rifle that says he's part of Hezbollah?

Clem Miller 9:39

Well, the I mean the Lebanese army has no control in the south of Lebanon where Hezbolla is. So they basic militarily the country is basically broken up into different areas, but you know, politically it still remains one country and Hezbollah is participating in the political system.

Steve Davenport 10:00

That seems confusing. Ah indeed. If I'm an investor, how do I, you know, do I just say it, you know, chaos versus non-chaos?

Clem Miller 10:11

Well, I mean if I were an investor in the Middle East, I would not invest in Lebanon.

Steve Davenport 10:19

Okay.

Clem Miller 10:20

And certainly I wouldn't invest. I mean, there's not much to invest in Lebanon. Um, I mean, certainly I don't know if they have a stock market or not, probably not, or maybe they do, and it's you know, just a maybe a few local banks or whatnot.

Steve Davenport 10:36

Um I sneak in a question about Saudi Arabia nuclear.

Clem Miller 10:41

Yeah, sure.

Steve Davenport 10:42

I mean, I saw that story this week about the nuclear industry in Saudi Arabia and the U.S. having a contract for all of the development or for for maintenance and development and how many billions of dollars it's gonna mean to the US nuclear industry.

Saudi Nuclear Deal And Proliferation

Steve Davenport 11:00

And I just kind of sit there and say, well, wait, aren't we not allowing nuclear in Iran? And we're trying to tell everybody that we think that nuclear is not something we want more proliferation of. But then we take the largest country in the region and we try to develop them their nuclear capability quickly and easily so that they can um have even more power because then they don't have to worry too much about their own consumption of energy. They can consume mostly from the nuclear side, and then that gives them more more power on the oil markets. Does it does that seem like a something that's gonna defeat or rule out nuclear proliferation if we make Saudi Arabia a nuclear power?

Clem Miller 12:15

Personally, I already think the whole idea of nuclear proliferation, of anti-nuclear proliferation is dead. I think it's been dead. I think it's been dead for a long time. You you know, you've got Pakistan, you've got India, you got North Korea, , you know, you've got Israel has nuclear weapons. Doesn't talk about them, but they've got, you know, allegedly 70, 80, 100-something nuclear weapons. Um I would be very surprised if Taiwan doesn't have them. They say they don't, but I would be surprised if they don't. Um, you know, when when push comes to shove, I mean, why wouldn't they want nuclear weapons, right? Um I don't know.

Steve Davenport 12:59

I guess right. I guess I get back to this, you know, is nuclear power um just a step towards nuclear weapons? Is it is do you think the Saudis need nuclear weapons and this will they'll somehow take the US involvement with developing their nuclear capability, and um they'll they'll develop their own little factory on the side that will take that same capability and put it into weaponry? I think that's a natural step.

Clem Miller 13:29

Uh I think for for Saudi Arabia, I think that they um, you know, the Iranians and the Saudis are not are not friends, okay? They're just not.

Steve Davenport 13:47

Oh, I agree.

Clem Miller 13:48

And it goes way back. I mean, it's the it's it's the whole Sunni Shiite split.

Steve Davenport 13:53

Right.

Clem Miller 13:54

It's the Arab-Persian split. I mean, it's just there's too much religious and cultural baggage there, and I just don't see you know peace breaking out in the Middle East, you know, everybody you know singing umbaya, right? In the Middle East. It's just not gonna happen, right? So Saudi Arabia is going to want to have its own nuclear weapons. And I don't think anybody's talking about openly about that, right? I think um, you know, the main the main course of action is to get from regular nuclear to nuclear weapons is to keep enriching. And part of the problem with Iran is that it was enriching beyond the amount necessary for regular nuclear power. So I in my mind, you know, even though they hadn't built a weapon yet, you know, they were preparing themselves so they they could build a weapon very quickly. And I don't mean, and you know, I I always made fun of people saying, oh, they're two weeks away from building a nuclear weapon. They've been two weeks away from building a nuclear weapon for decades, right? They were saying the same thing a deck, you know, decades ago. It's just that they they wanted to have enough material around so that they could build lots of nuclear weapons. So Iran, Iran has clearly wanted to have nuclear weapons for a long time. Uh, they just didn't want to take those last few steps in order to do it. Uh, they just wanted to be just as shy of it so that you know people wouldn't come and attack them over it. Now that people have attacked them over it, they have every incentive to go ahead and and actually build some. So I wouldn't be able to do that.

Steve Davenport 15:44

I guess I look at it as as Trump announced it as a business win for America. And I think of it as another example of how this situation has gotten out of hand in the Middle East, and it's gonna be there's gonna be problems there now for you know another few decades. Because we if if we do introduce this nuclear capability to Saudi Arabia, you know, other countries who are enemies of Saudi Arabia are gonna feel like they need it, and Saudi Arabia is gonna feel a little bit full of itself and it's gonna you know pressure others who don't have the capability because they now have, you know.

Clem Miller 16:27

So Yemen, like Yemen.

Steve Davenport 16:29

Correct. Like I think that if we look at this whole question of proliferation, I agree with you that it's I think the technology and the abilities, I mean, we used it in the 40s. So to me, I I don't I can't imagine that something we could do in the 40s couldn't be figured out today um by scientists who were as well educated in US, China, or wherever they're educated. Um, it's gotta be um easier to do than we're making it out to be, don't you think?

Clem Miller 17:04

I I totally agree. And then you you're gonna have you're gonna have people who are going to, you know, nuclear experts who are going to sell out their technology too. Um there was a guy in um Pakistan, AQ Khan, Abdel Khadir Khan, and he was instrumental in in proliferation to other countries.

Steve Davenport 17:28

Wow.

Clem Miller 17:29

I think to to North Korea, for example, or to Iran. Okay.

Speaker 1 17:35

I didn't want to completely derail it, but I think that it's kind of in this whole discussion when we talk about the Houthis and we talk about these splinter groups and we talk about power.

Clem Miller 17:44

Yeah, no, it's important. And I think I think Saudi Arabia clearly they want it, right? They view it as a guaranteer of of the regime, right? To have nuclear capability and you know to defend against Iran and to even economically it's gotta be good for them, right?

Speaker 1 18:07

I mean, because they have so much now capability that they're I mean, if if if we're gonna threaten Iran and the Karga Island where all of the you know equipment and the you know the energy is processed in Iran, then you we've seen some of the Houthis and other people attack Saudi Arabia facilities with drones and other things. So I think that nuclear, I mean, it serves a purpose in three or four different ways for Saudi Arabia, doesn't it? If if there is a a period where the you know their their oil capabilities are down, they they can you know switch over, can't they?

Clem Miller 18:51

Well, you know, they can't they're not gonna be selling the nuclear power.

Speaker 1 18:55

Uh no, but you don't think they'll use it for their own.

Clem Miller 18:59

Yeah, no, they'll use it, they'll use it for their own. Um, as you know, if they use nuclear power increasingly at home, that means they don't need to have you know oil, they don't need to use as much oil and gas at home, they can export more.

Steve Davenport 19:13

Yeah. So yeah, do you think there's an investment opportunity here? Like US nuclear is driven by these five companies, and therefore, if this becomes reality, those five companies might you know have an un, you know, an unusual surge in their activities.

Clem Miller 19:34

The nuclear energy industry is something to watch out for carefully. I don't know, I don't see a real guarantee that this nuclear renaissance is going to happen like some might. Uh, but it could happen. And I think it's definitely worth watching to see if it does happen. Uh, but you know, it depends on a lot of financing,

Nuclear Power As An Investment Theme

Clem Miller 20:04

it depends on, you know, obviously technological advancement or regulatory issues. There's a lot of there's a lot of barriers to making that kind of nuclear renaissance happen. So it's just um you know, it could happen.

Steve Davenport 20:21

Are you saying it's too far in the future or it's not clear enough whether there will be beneficiaries?

Clem Miller 20:27

Well you know, it's the nuclear industry's been around a long time. And you know, you had some issues with nuclear power, and you've always had the waste disposal issue, you've had the safety issue with things like Three Mile Island and Fukushima and and Chernobyl, right? And so there's been this sort of push to try to get safer and safer and safer nuclear reactors, and um and there's this push to try to move into more you know small nuclear, like mod like so-called modular nuclear reactors.

Steve Davenport 21:10

So there's a lot of exciting area is, right?

Clem Miller 21:14

Yeah, I mean there's a lot been a lot of technological development to try to get over some of these problems that there have been in the past, but there's still gonna be regulatory issues, there's gonna be , you know, NIMBY, not in my backyard type of issues. Um so I I think I think there's I think there's a future there. The question is, you know, is it is it a a huge investment opportunity? I don't think so yet.

Steve Davenport 21:43

Right. Um it's not exist for the Saudis, they could probably tell the people what they what they want, right?

Clem Miller 21:51

Oh yeah. I mean, you know, I think I don't know how many how much of a jump it is from being a petroleum engineer to being a nuclear engineer. It might be kind of a jump, but um, I'm sure they can handle that.

Steve Davenport 22:07

Yeah, it's just an interesting wrinkle on this whole case that you know you think things are gonna get more stable or more calm, and then you know, something like this gets announced, and it that again puts you into a spiral as to where and what and how to react as an investor. Right.

Clem Miller 22:25

And the day after it gets announced, you've got Israel saying, , you know, Telling telling Trump, oh my gosh, this is a terrible thing. Uh you got to make it contingent on Saudi Arabia joining the you know, the alliance with Israel, the Abraham Accords. And so Trump comes out and says that, and the A Saudis are like now pissed. So this may this thing this thing may still not happen.

Steve Davenport 22:52

No, I I think there's a lot of between some boasting and some actual implementation. But I'm just trying to say is there a group of stocks that are going to immediately go up, and that if you believe that nuclear, I mean, I believe that nuclear is a better solution in some ways, then it it it it might be some investors who want to put their money where their mouth is and say, hey, I think long term this is a better solution. I mean, I think the carbon solutions have kind of been used up, haven't they?

Clem Miller 23:27

There's plenty more carbon where it comes from. The question is, h , how , you know, do we really want to have a lot more forest fires in Canada and a lot more heat in in Europe and Japan and you know in the United States during the summertime? I mean, how much climate damage are we willing to absorb in order to keep doing carbon?

Steve Davenport 23:50

Well, I agree. That's why I'm saying that you know, you can see people who might flip and suddenly say, yeah, let's let's get behind nuclear. And and if you do that with your dollars and you speak, you know, that's that's one way to kind of help move it along, isn't it?

Clem Miller 24:08

I think I think nuclear, you know, most climate um politics people, most people who are you know involved in the climate world like nuclear. They prefer nuclear, right? Correct. That's why I'm bringing it up. Yeah, so so I think nuclear is the one thing that both people on both the right and the left can get behind.

Steve Davenport 24:34

Yeah, I just I just wonder if there's again, Trump is trying to line up a group who will, you know, be happy at the midterm elections. And, you know, it doesn't seem like there's that much of a lobby for nuclear, but I think that it might be something that, you know, certain parts of the country or certain areas or um would would look at and say, this is very positive for us in our industry, and you know, it's gonna be good for us long term. And so I think we're all looking for things that are more reasonably priced than some of the AI companies and the quantum companies. And this feels like it's a technology that's been around forever. I mean, the last 70 years, and we're gonna be able to, you know, potentially have a an impactful change in the way we use energy in the U.S. and around the world. But maybe not. Maybe it's too complicated, maybe the NIMBY's problem and other problems overrule it. But I don't know. I think that um the the world needs some solutions in energy that are non-carbon based. And I haven't seen enough of the hydrogen stuff and other things to think that it's not gonna come from nuclear.

Clem Miller 25:54

Yeah, I I think I mean, just when you think about hydrogen, you think about how explosive it is, you know, you really have to wonder about about hydrogen. But stability, yeah. But nuclear, I I I I think there is a future for nuclear. Uh, but it's and I I I have to believe that it's possible to create safe nuclear. I have to believe that. I mean, when when Chernobyl happened, you know, that was an old-style Soviet nuclear power plant in the in the late 80s. And think about all the technological advancement we've had since since the late 1980s. Tons and tons of technological advancement. So the the there's gotta be a way to make a safe nuclear power plant um, you know, like relatively safe.

Steve Davenport 26:42

I mean France has been doing it for a long time and is a major part of their economy. And I gotta think Germany will now have to go back because I don't think they're gonna, you know, I don't think they're gonna be able to use natural gas from Russia the way they were.

Clem Miller 26:57

No.

Steve Davenport 26:58

So um, but I guess I wanna give you one last, you know, what else do we need to do as investors around how the Houthis affect the energy price and affect the truths? And give us a scenario of what you think is most likely going forward with the Middle East oil prices and the Houthis in Iran.

Clem Miller 27:20

Well, my the worst case scenario is that the Houthis will try to set up the same kind of tolling system at the at the entrance to the Red Sea, the the so-called Babel Mandeb Strait, , that the Iranians are setting up at the Strait of Hormuz. So that's the worst case scenario.

Steve Davenport 27:43

And what do you think is the most likely case?

Clem Miller 27:46

Well, the most likely case is that there's going to be some settlement between the United States and Iran, , which is basically going to be the US, it's gonna be

When Straits Start Charging Tolls

Clem Miller 28:01

it's going to be sort of a safe-facing a face-saving loss on the part of Trump. He's gonna pull out, and the Iranians are going to, they're not gonna laugh at him on the way out. They'll will have agreed not to do that, but there'll be some face-saving solution to the to this. But it'll still leave the Iranians, at least in the Strait of Horror moves, it'll leave the Iranians ineffective control of the strait. Um, you know, perhaps with lower fees or more nominal fees or or or what have you, you know, some kind of maybe um, you know, Iranians in control, but maybe other parties benefit from the Iranian control. Uh, you know, maybe Iran 50%, Oman 50%, or you know, maybe Iran you know 50% and others 25 and 20. I mean, I don't know, there's lots of different possibilities for arranging how the strait works. But but I I think the main sea change here is that um, as you've pointed out, that straits are now being treated like canals, right? Canals, there've always been charges on the Suez Canal and the Panama Canal, which makes sense because those are man-made bodies of water, right? Um and now they're simply being provided the same kinds of rules are being um imposed, you know, against the law of the sea, by the way, but the same kind of rules are being imposed on on other straits in the world.

Steve Davenport 29:41

Right. I mean, my big worry is the strait of Taiwan and and that China would try to blockade and not invade um Taiwan. And by doing that blockade, um, I think the chip industry and the technology-centric U.S. economy would be much more adversely affected because all these future growth assumptions are based on 80% of the chips coming from the island of Taiwan. Yep. So I I look at that and say, if you want to see something that causes this market to really react fast, China announcing a blockade, China positioning a blockade, I don't think they need to shoot one one gun. I think they just move their ships in and they make a statement and they say the current government is um stretching away from its

Taiwan Blockade And Chip Exposure

Steve Davenport 30:32

homeland and it needs to become more centric on, you know, a part of China. And I think that that would um it will be what Z ultimately wants to do, which is bring back Hong Kong and bring back Taiwan and reunite China. And I think it creates it's a huge asset to have all those chip manufacturers and all that production in Taiwan. And for the US and other countries to let it get that strong and that big, um, it's just another example of how we we don't understand when we put stuff offshore the ramifications that could be very negative, all right? Yep. So um I think I mean, do you have anything else you want to finish with?

Clem Miller 31:21

Nope, that's it. I'm I think we've covered covered the Houthis and everything around them pretty well.

Steve Davenport 31:28

All right. Um listeners, thanks for listening to us, and we appreciate you. And we want you to let us know what you like and don't like, and let's continue to make our investment knowledge and investment IQ higher and stronger. So thanks everyone. Have a great weekend.